What Is A One Way Buy-Sell Agreement?

What Is A One Way Buy-Sell Agreement?

When people think of Buy-Sell Agreements, they often assume they are only for businesses that have multiple owners. But what happens if you are a business owner that dies and you don't have a partner to buy out your shares from your spouse or kids?

A great solution to this is a One-Way Buy Sell Agreement.

Sometimes there is only one logical buyer for a business--whether that buyer is already indetified or has to be fond. In this situation, it's a given that only one person will be buying out the current owners.

A one way buy sell agreement is a written contract for the sale and purchase of an owner's business interest where only one party has the right and obligation to buy.

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How It Works

  1. The Owner or Multiple Owners enter into an agreement to sell to one buyer and that buyer agrees to purchase the interest of all other owners.
  2. Buyer purchases life insurance on the sellers to fund the plan
  3. when a seller dies, the buyer recieves the life insurance proceeds
  4. Buyer uses life insruance proceeds to purchase the seller's business interest from the seller's estate

Common One-Way Buy/Sell Scenarios

  • Family owns and runs a business.  Everyone agreems that a specific sibling will run the business if either mom or dad passes away.
  • Mulitiple owners of a business--all of whom want to get out of the business, except for one
  • A 100% owner has no family buyer in sight. A buyer is then usually selected from key employees in the business

What Happens if There is No Buy/Sell Agreement?

  1. Close down the business--no value recieved
  2. liquidate the business--a portion of value is recieved
  3. Unqualified family members could take over the business and attempt to run it--unknown probability of success

Whats Are Better Options?

Here's a better option: Sell the business to a competitor, willing and able relative, or key employee and lock in the value with a funded buy/sell agreement--that way your estate will recieve the full value of the business.

What Should I Consider When Looking at Potential Buyers?

  • Experience, Skill, and Ability
  • Time Commitment
  • Existing Employees
  • Existing Management
  • Franchisor Requirements
  • Education and Training Needs

Summary: The Business Owner's Action Plan

  1. Set the value of your business
  2. Determine the appropriate candidate
  3. consult an attorney who specializes in Business Continuation Agreements
  4. Create a formal Buy/Sell Agreement
  5. Fully Insure the value of each owner's interest to guarentee payment

 

Why Work With Aaron Peacock?

I’m am a top producing commercial insurance professional with licenses in property & casualty, workers compensation, life & disability, and group health insurance. I am an Appalachian State University alum currently living in Hickory North Carolina and my  office is located in my alma mater’s city of Boone North Carolina. I am considered an expert in helping business owners with their business succession plans and I insure many firms in the western half of North Carolina. In addition to performing at a very high level in my role as my client’s insurance partner I am also engaged to be married to my fiancé Anna, who is a kindergarten teacher and master chocolate chip cookie baker. I am a volunteer and proud supporter of Appalachian State’s Walker College of Business where I have been asked to speak about relationship marketing & direct sales, personal productivity, career development, and personal finance to the students enrolled in the business school.  In our spare time, Anna and I enjoy walking our dogs Sophie & Bruce, playing yard games and grilling out on our Big Green Egg, riding mountain bikes, and getting out on the water on some stand up paddle boards.

 If you are ready, feel free to request a life insurance quote on this site – here’s the link aaronpeacock.com/free-quote or call me at 828-434-3215 or email me at aaron@aaronpeacock.com. It’s easy, fast, safe and always secure. 

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Aaron Peacock

Aaron Peacock

Hi, I'm Aaron and I'm a marketing representative for Federated Mutual Insurance Company - a Ward's Top 50 and an A.M. BEST A+ Superior rated insurance carrier. After my wife was severely injured in an accident involving a distracted driver, I've found one of my passions in life is to help educate people about the Danger of Distracted Driving and have started speaking to businesses in Western North Carolina on implementing the Federated Insurance DriveS.A.F.E. program. Click here to read more...

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